Vanguard Mutual Funds: Choosing Wellesley Or Wellington

Vanguard offers a range of mutual funds that can be a good choice for investors looking for steady income and capital appreciation. Two of these are the Vanguard Wellesley Income Fund and the Vanguard Wellington Fund. Both funds have a long history, with the Wellesley fund established in 1970 and the Wellington fund being the oldest balanced mutual fund, launched in 1929. They have a similar investment objective of providing long-term growth of income and a high and sustainable level of current income. However, they differ in their investment strategies and asset allocation. The Wellesley fund is considered more conservative and focuses on investment-grade bonds and dividend-paying stocks, while the Wellington fund allocates a larger portion of its portfolio to stocks, investing in large-cap value stocks and investment-grade corporate bonds. When deciding which fund to invest in, it is important to consider your financial goals, risk tolerance, and the performance and fees associated with each fund.

Vanguard Wellesley Income Fund Admiral Shares

The Vanguard Wellesley Income Fund Admiral Shares (VWIAX) is a mutual fund that seeks to provide long-term income growth and high, sustainable levels of current income, along with moderate long-term capital appreciation. The fund has a minimum investment requirement of $50,000 and a low expense ratio of 0.16%.

VWIAX is an income-oriented balanced fund, investing in both investment-grade bonds and equities. As of June 2024, the fund's portfolio consisted of approximately 37% stocks, 61.94% bonds, and 0.72% cash. It holds 71 blue-chip stocks and over 1,200 individual bond positions, with an average duration of 10.4 years and a yield-to-maturity of 5.3%. The fund's largest holdings as of March 31, 2024, included Philip Morris International.

The Vanguard Wellesley Income Fund has been successful, generating an average annual return of nearly 10% since its inception in 1970. It has consistently outperformed its benchmark and demonstrated its ability to limit downside risk. During the 2008 stock market collapse, for example, the fund declined by just 10%, significantly less than stock-only funds. As of July 2024, the fund had an average 3-year pre-tax annualized return of 0.82%, 4.20% for the last five years, and 5.00% over 10 years, earning it a four- or five-star rating from Morningstar.

One advantage of the fund is its relatively low management fees. However, the high annual turnover rate of 53% means that fund holders may be exposed to taxable events that can impact top-line returns. The fund's large exposure to bonds could also react negatively to increasing interest rates.

Overall, the Vanguard Wellesley Income Fund Admiral Shares is a conservative, income-focused fund suitable for long-term investors seeking regular income and modest capital gains.

Vanguard Wellesley Income Fund Investor Shares

The Vanguard Wellesley Income Fund Investor Shares (VWINX) is a mutual fund that seeks to provide long-term growth of income and a high and sustainable level of current income, along with moderate long-term capital appreciation. Established in 1970, it has become one of the more successful income-oriented balanced funds for conservative investors. The fund has a minimum investment requirement of $3,000 and an expense ratio of 0.23%, which is considered low for its category.

The Vanguard Wellesley Income Fund is a conservative balanced income fund, investing in fixed-income vehicles and stocks. It is designed for medium- and long-term investors who want steady income and can accept modest risk levels and modest capital appreciation. The fund's portfolio is composed of approximately 37% stocks, 61.94% bonds, and 0.72% cash, as of June 2024. It holds 71 blue-chip stocks and more than 1,200 individual bond positions, with an average duration of 10.4 years and a yield-to-maturity of 5.3%.

The fund's investment objective is to seek consistent total returns made up of current income from bonds, dividends, and modest capital appreciation. While it is categorized as an income fund, it utilizes a balanced approach, allocating only one-third to stocks and roughly two-thirds to bonds. This focus on bonds makes the fund well-suited to investors seeking portfolio income and only modest capital gains, such as those close to retirement.

The fund's smaller weighting to stocks is concentrated on companies offering above-average dividend yields or increasing dividends, providing a higher quarterly income distribution (currently 2.03% trailing twelve-month yield) than non-income-focused balanced funds. Among its fixed-income investments, the fund invests 60% to 65% of its assets in investment-grade, fixed-income securities, including corporate bonds, U.S. Treasuries, government agency bonds, and mortgage-backed securities (MBS).

The Vanguard Wellesley Income Fund has generated an average annual return of nearly 10% since its inception and has consistently demonstrated its ability to limit downside risk while outperforming its benchmark. During the 2008 stock market collapse, for example, it declined by just 10%, significantly less than stock-only funds. As of July 2024, the fund had an average 3-year pre-tax annualized return of 0.82%, 4.20% for the last five years, and 5.00% over 10 years, earning it a four- or five-star rating from Morningstar.

One advantage of the fund is its relatively low management fees. However, there is a minimum investment requirement, and the fund is weighted more towards bonds than most of its peers. Additionally, the fund has a high annual turnover rate of 53%, which may expose investors to more taxable events. Overall, the Vanguard Wellesley Income Fund is a high-quality, conservative mutual fund suitable for long-term investors seeking regular income and modest capital gains.

Vanguard Wellington Fund Investor Shares

The Vanguard Wellington Fund Investor Shares (VWELX) is one of the company's oldest mutual funds and is, in fact, America's oldest balanced fund. It has a low expense ratio of 0.26% and a minimum investment requirement of $3,000.

The fund's portfolio is constructed with a large allocation to stocks, with roughly 65% of the portfolio invested in large-cap value stocks and the remaining 34% in mid-term investment-grade corporate bonds. The top holdings include Alphabet Inc Class A, UnitedHealth Group Inc, and Meta Platforms Inc Class A.

The fund's investment objective is to provide consistent total returns, including current income from bonds, dividends, and modest capital appreciation. It has a strong performance history, with a one-year return of 18.83% and a 10-year return of 8.31%, slightly underperforming its benchmark, the Wellington Composite Index.

The Vanguard Wellington Fund is managed by experienced professionals with deep resources. It is well-regarded by Morningstar, which has given it a Medalist rating. The fund's exceptional process is grounded in bottom-up research, and its low fees make it a top choice for investors.

Overall, the Vanguard Wellington Fund Investor Shares is a well-established, highly-rated mutual fund with a strong performance history and a balanced investment approach. It is a good option for investors seeking a diversified portfolio with exposure to both stocks and investment-grade bonds.

Vanguard Wellington Fund performance

The Vanguard Wellington Fund Investor Shares (VWELX) is Vanguard's oldest mutual fund and America's oldest balanced fund. As of 27 September 2024, the fund had a 1-day return of -0.04% and total assets of 113.1 billion. The expense ratio is 0.260% and the distribution fee level is low.

The fund has a 90% weighting towards stocks, with 65% of the portfolio invested in large-cap value stocks and the remaining 34% in mid-term investment-grade corporate bonds. The benchmark for this fund is the Wellington Composite Index. As of August 2024, the fund's one-year and 10-year returns were 18.83% and 8.31% respectively, compared to the index's 20.17% and 9.29% for the same periods.

The fund has a Morningstar Medalist Rating and is considered one of the top balanced funds. It has experienced managers, deep resources, and low fees, making it a top choice for investors.

Vanguard Wellesley Income Fund performance

The Vanguard Wellesley Income Fund has been around since 1970, when Vanguard purchased Wellington Management. It is a conservative balanced income fund, designed for medium- and long-term investors who want a steady income and can accept modest risk levels and modest capital appreciation.

The fund has a Morningstar four- or five-star rating and has generated an average annual return of nearly 10% since its inception. As of July 2024, the fund has an average 3-year pre-tax annualized return of 0.82%, 4.20% for the last five years, and 5.00% over 10 years.

The fund's investment objective is to seek consistent total returns made up of current income from bonds, dividends, and modest capital appreciation. It is unique in that it allocates only one-third to stocks and roughly two-thirds to bonds. It is therefore best suited to investors looking for portfolio income and only modest capital gains.

The Vanguard Wellesley Income Fund has two share types: Investor Shares and Admiral Shares. The Investor Shares require a minimum investment of $3,000, with an expense ratio of 0.23%. The Admiral Shares require a minimum investment of $50,000 but have a lower expense ratio of 0.16%.

Frequently asked questions